Western Institute of Technology vs Salas (1997)

Facts: Private respondents are the majority and controlling members of the Board of
Trustees of Western Institute of Technology, Inc. a stock corporation engaged in the
operation, among others, of an educational institution. Then, the board of directors
amended their by laws giving the members of board of directors a compensation. The
ten per centum of the net profits shall be distributed equally among the ten members
of the Board of Trustees. Few years later, the private respondents were charged of
falsification of public documents and estafa. The charge for falsification of public
document was anchored on the private respondents’ submission of WIT’s income
statement for the fiscal year 1985-1986 with the Securities and Exchange Commission
(SEC) reflecting therein the disbursement of corporate funds making it appear that
the same was passed by the board on March 30, 1986, when in truth, the same was
actually passed on June 1, 1986, a date not covered by the corporation’s fiscal year
1985-1986. After a full-blown hearing TC handed down a verdict of acquittal on both
counts without imposing any civil liability against the accused therein.

Issue: WON the compensation of the board of directors as stated in their by laws
violates the corporation code?

Held: NO. There is no argument that directors or trustees, as the case may be, are not
entitled to salary or other compensation when they perform nothing more than the
usual and ordinary duties of their office. This rule is founded upon a presumption that
directors/trustees render service gratuitously, and that the return upon their shares
adequately furnishes the motives for service, without compensation.
Under the foregoing section, there are only two (2) ways by which members of the
board can be granted compensation apart from reasonable per diems: (1) when there
is a provision in the by-laws fixing their compensation; and (2) when the stockholders
representing a majority of the outstanding capital stock at a regular or special
stockholders’ meeting agree to give it to them. In the case at bench, Resolution No.
48, s. 1986 granted monthly compensation to private respondents not in their
capacity as members of the board, but rather as officers of the corporation, more
particularly as Chairman, Vice-Chairman, Treasurer and Secretary of Western Institute
of Technology. Clearly, therefore, the prohibition with respect to granting
compensation to corporate directors/trustees as such under Section 30 is not violated
in this particular case.